The 45-degree line on a chart relating consumption and income shows:
A)all points where the MPC is constant.
B)all points at which saving and income are equal.
C)all the points at which consumption and income are equal.
D)the amounts households will plan to save at each possible level of income.

Question

Quizplus · Accepted Answer

The 45-degree line represents all the points where consumption (C) and income (Y) are equal, which means that households are consuming all their income and not saving any of it. This line is also known as the "break-even line" because it represents the level of income at which households are breaking even between their consumption and their income. Points above the 45-degree line represent situations where consumption is greater than income and points below the line represent situations where income is greater than consumption.

The 45-Degree Line on a Chart Relating Consumption and Income